IMF Directors Consider Changes to Currency Basket

International Monetary Fund officials meeting last month discussed changes to its Special Drawing Right currency basket, though fund executive board members said they did not want to loosen criteria in order to bring in new currencies.

The IMF’s executive board met late last month to discuss the SDR, an international reserve asset created by the fund that acts as a potential claim on the currencies of IMF members instead of acting as a currency itself. At issue was the requirements for inclusion in the basket and whether changes are needed to better reflect the international monetary system.

The IMF said in a release that most directors considered current requirements for currencies in the basket “remain appropriate,” though a number of directors expressed interest in potential alternatives. Still, the fund said that directors do not want to weaken the requirements just to broaden the basket.

“Directors stressed that the bar for SDR basket inclusion should not be lowered,” the IMF said.

The SDR basket is currently made up of four currencies–the dollar, yen, euro and pound–and there has been a push, particularly by the Chinese, to expand the currencies included in the basket. Beijing officials see the inclusion of the yuan in the basket as another step as they try and expand the use and influence of their currency, and promote alternatives to the dollar.

Currencies included in the SDR basket have to be issued by a country that is a large exporter, and the currency must be considered “freely usable” in that it is used for international payments and is widely traded.